Journal of Financial Economics Vol. 17 No. 2 1986
Empirical determinants of the relative yields on taxable and tax-exempt securities
Abstract
Yields on short-term prime-grade municipals vary through time in relation to after-corporate-tax yields on short-term U.S. Treasury securities. The pattern is not related to the default premium in municipal yields or to the historical ceiling on bank deposit rates (Regulation Q). However, there is a strong link to the default premium in corporate yields and to municipal holdings by large commercial banks. These findings suggest that taxable and tax-exempt markets are linked both by the capital-structure decisions of firms and by the tax-arbitrage activities of banks.
- DOI
- 10.1016/0304-405x(86)90069-3
- Volume
- 17
- Issue
- 2
- Pages
- 335-355
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref